AFRICANGLOBE – If Internet use proliferates in Africa at the rate mobile phones did in the early 2000s, the continent stands to add as much as $300 billion to its economic growth by 2025, a new study by the McKinsey Global Institute has found.
With an Internet penetration of just 16 percent, Africa has long been held back by infrastructure challenges tied to the continent’s poverty, vast area and largely rural population. Its average “iGDP” — the Internet sector’s contribution to the gross domestic product — is the lowest of all continents at 1.1 percent, according to McKinsey.
But findings released this week in McKinsey’s study “Lions Go Digital” indicate that a veritable transformation of the African economy could be just around the corner “if the Internet achieves the same kind of scale and impact as the spread of mobile phones in Africa.”
“The promise of the Internet, especially given what we’ve seen in mobile phones — which have had a greater impact on Africa than anywhere else in the world — is actually quite astonishing,” said Safraodu Yeboah-Amankwah, one of the authors of the report and a senior partner at McKinsey based in Johannesburg.
Yeboah-Amankwah said that “in a continent where people just 10 or 15 years ago were talking about ‘a phone in every village,’” McKinsey found unexpectedly high rates of technology sector entrepreneurship, urban Internet usage and infrastructure investment, all of which indicate that Africa is poised to make a digital leap.
The report, which studied data and usage trends in 14 countries, says the Internet is slowly catching on in Africa due to urbanization, gradually increasing incomes and the coming of age of a technologically adept generation.
Though continental Internet penetration is still low, McKinsey researchers were surprised to find that roughly 50 percent of urban Africans use the Internet — and half of them do so “intensively,” a rate on par with burgeoning tech giants India and China.
Africa’s iGDP is conservatively projected to rise to 5 or 6 percent — a level comparable to that of developed nations — by 2025, but McKinsey says a technology boom similar to what Africa witnessed when cell phones were popularized could spike that number to as high as 10 percent, or $300 billion.
The impact of such a boom could reverberate across every sphere of society, from health and education to retail and financial services.
By connecting remote communities to banks and medical information, providing e-textbooks to schoolchildren and weather forecasts to farmers, expanded Internet access could help bridge the vast geographical and financial gaps that have slowed the spread of the Internet in the first place.
The Mobile Lesson
Analysts at McKinsey and leaders in Africa’s tech sector do not believe Internet access has been slow to proliferate due to lack of demand. The flourishing mobile sector taught the continent — and its potential investors — the important lesson that relative poverty does not preclude demand for new technology.
Between 2000 and 2012, the number of mobile connections in Africa skyrocketed by 44 percent, the highest growth rate in the world, according to a study from Deloitte. The growth far outstripped estimates.
Before the boom, “there was a lot of discussion in Africa: ‘If only we could get a phone in every village, if only we could get landline penetration higher,’” said McKinsey’s Yeboah-Amankwah. “What people misunderstood is that the demand for mobile phones and people willing to pay for them were already there.”
Likewise, demand for Internet access has already arrived. Persuading people to log on is not an obstacle for tech startups in Africa, says Churchill Nanje Mambe, a tech entrepreneur from Cameroon who founded an Africa-focused job search engine called Njorku.
“A lot of people believe they can find information on the Internet, but most of them don’t have access,” said Nanje Mambe. “They want to do it, but they can’t.”
That may be changing. McKinsey researchers estimate that Africa could be on pace to triple its Internet penetration to 50 percent, or 600 million users, and increase the number of Internet-ready smartphones on the continent sixfold, to about 360 million, by 2025.
All 14 countries in the study have made expanding Internet access a policy objective, and a wave of private sector and nonprofit initiatives aims to catalyze the process.
On Wednesday, Google announced plans to launch a pilot of its ambitious Project Link initiative in Kampala, Uganda. Through the project, the company will build high-speed fiber-optic networks in regions of the world where Internet infrastructure is lagging.
“We hope it’s a foundation to support the needs of a new crop of entrepreneurs and innovators,” Google said on its Africa blog.
Of course, different countries have had varying degrees of success in capitalizing on the Internet to fuel economic growth. Senegal and Kenya, despite being neither the largest nor the wealthiest countries in Africa, lead the charge with the continent’s highest iGDPs — achieved, McKinsey says, because of governments that have made stimulating Internet demand a priority.
Senegal’s government was the first to adopt fiber-optic infrastructure and incentivize Internet cafes; Kenya has benefited from close partnership with private firms that have funded ICT expansion in the country.
The Kenyan capital, Nairobi — the so-called Silicon Savannah — has incubated innovative startups like the crowdsourcing pioneer Ushahidi, and M-Pesa, which leads the world in mobile financial transactions.
But McKinsey found that tech entrepreneurs are thriving outside Kenya too, making good on gambles by wealthy funders long hesitant to invest in the world’s poorest continent.
Cameroon’s Nanje Mambe is among them, and he says a higher rate of Internet penetration would tip the balance for startups like Njorku, which is just over two years old and has been profiled in Forbes magazine.
“The issue for Njorku is the gap between the people who are interested in looking for a job and the availability of the Internet,” Nanje Mambe said.
“The cost is high and the penetration is low, but if Internet becomes widely available and people can have it in their homes, we could put up an ad and the return on investment would be very high.”
By: Michael Pizzi